Massachusetts Juvenile Justice PFS Initiative

Key Information

Project Stage: Launched ProjectsIssue Area: JusticeRegion: East

Government Payor/Client: Commonwealth of Massachusetts

Project Overview

The Massachusetts Juvenile Justice PFS Initiative, the fourth PFS project launched in the country and the largest to-date, was designed to improve outcomes for hundreds of at-risk young men in the probation system or leaving the juvenile justice system. The intentions of the Massachusetts Juvenile Justice Pay for Success Initiative was to, not only improve the lives of young people, but also to reduce crime, promote safer and stronger communities and save taxpayer dollars. The initiative allowed Roca, a nonprofit based in Chelsea, to provide its high-impact intervention to 929 at-risk young men aged 17 to 23 who were in the probation system or exiting the juvenile justice system. Roca’s programming aims to reduce recidivism and increase employment through intensive street outreach and targeted life skills, education and employment programming. The Roca intervention was delivered over an intensive two-year period followed by two years of follow-up engagement.

$27 Million Initiative Is Largest Financial Investment in a Pay for Success Contract in the Country

Former Massachusetts Governor Deval Patrick announced the launch of the nation’s largest financial investment in a PFS initiative, which is designed to improve outcomes for hundreds of at-risk young men in the probation system or leaving the juvenile justice system. The Massachusetts Juvenile Justice Pay for Success Initiative will not only improve the lives of young people, but also reduce crime, promote safer and stronger communities and save taxpayer dollars.

Pay for Success (PFS) contracts, also called Social Impact Bonds, combine nonprofit expertise, private sector funding, and rigorous evaluation to transform the way government and society respond to chronic social problems. In a PFS initiative, funders assume up front financial risk, and taxpayers pay for a program only if a third-party evaluator determines that the initiative has achieved specific outcomes that create benefits to society and generate savings for government.

The Project

The initiative will allow Roca to provide its high-impact intervention to 929 at-risk young men aged 17 to 23 who are in the probation system or exiting the juvenile justice system. Roca’s programming aims to reduce recidivism and increase employment through intensive street outreach and targeted life skills, education and employment programming. The Roca intervention is delivered over an intensive two-year period followed by two years of follow-up engagement.

Massachusetts will make up to $27 million in success payments for this seven-year project, which is the largest investment in a PFS initiative in the U.S. to date.

Funding for the Massachusetts initiative includes commercial and philanthropic funding as well as risk sharing, in the form of deferred service fees, from the service provider (Roca) and project intermediary (Third Sector Capital Partners). The funders assume project risk by financing services up front with the promise of repayment from government sources only in the event of success.

Massachusetts will repay funders only if Roca’s services are proven to produce positive societal outcomes and savings for the Commonwealth. These success payments will come from the Commonwealth and the U.S. Department of Labor, which awarded the Commonwealth a first-of-its-kind PFS grant of $11.7 million. The additional funding for success payments from the Department of Labor grant will enable the Commonwealth to extend the project, should it prove successful, to an additional 391 young men, thereby serving a total of up to 1,320 young men over nine years.

Partners

Government

Commonwealth of Massachusetts

The Commonwealth makes payments for success if the independent third-party evaluator and validator determine that Roca’s program has reduced the number of days that participating young men spend in prison, has improved their job readiness, and has increased their employment. At higher levels of success the funders can receive a small percentage return on their funding in return for assuming the up front financial risk.

Service Provider

Roca, Inc.

Roca is a nonprofit that has delivered an evidence-based high impact intervention to young people in the Chelsea and Springfield, Massachusetts areas for 25 years. Roca’s model is based on proven behavioral change theories and trains high-risk young men in job readiness, educational readiness, and life skills. The program has a proven track record of reducing incarceration rates among the highest risk individuals. In this PFS project, Roca is deferring 15% of its service fees; it will only be paid that portion of its fees if results are achieved.

Project Intermediary

Third Sector Capital Partners, Inc.

Third Sector Capital Partners, Inc. is a nonprofit advisory firm that works with government, service providers, and funders to develop and launch PFS projects. As project intermediary for this initiative, Third Sector arranged project funding and is responsible for overseeing project implementation, distributing funding to Roca and managing repayment to funders. New Profit Inc., a national venture philanthropy fund and social innovation organization, will provide additional management support. Third Sector is deferring 15% of its management fees; it will only be paid that portion of its fees if results are achieved.

Funders

Goldman Sachs will provide $9 million in senior loan financing through its Social Impact Fund.

Case Studies

Preparing for a Pay for Success Opportunity: Third Sector, with support from the Rockefeller Foundation, published a case study on its experience working with Roca, Inc. on their successful response to Massachusetts’ Social Innovation Financing project for juvenile justice. The case discusses the challenges, lessons learned, and process of launching the nation’s first state-level Pay for Success contract.

Third Sector would like to thank Ropes & Gray for their valuable legal assistance throughout this project.